House prices up 0.7% in January following pre-Christmas dip

The average UK property price increased by 0.7% in January compared to the previous month, reaching a record-high of £299,138, according to Halifax.

The increase follows, a 0.2% drop in monthly prices in December, according to the lender’s monthly house price index (HPI)

Annual growth was slower at 3%, compared to 3.4% the previous month and is the slowest rate since last July. 

Amanda Bryden, head of mortgages at Halifax said: “Affordability is still a challenge for many would-be buyers, but the market’s resilience is noteworthy. There’s strong demand for new mortgages and growth in lending. With a stamp duty increase looming, some of this demand may have come from first-time buyers eager to complete transactions before the end of March.”

Stamp duty changes were announced in the Autumn Budget, including the removal of temporary reliefs for first time buyers in April in England and Northern Ireland.

Bryden continued: “Despite geopolitical uncertainties, and waning consumer confidence, other key indicators look fairly positive for the housing market. The Bank of England has made its first base rate cut of the year, and there are probably more to come. Household earnings are expected to continue outpacing inflation – albeit that gap may narrow – easing some of the financial pressure still being felt from the cost-of-living squeeze.

>>See also: Buyer demand up 13% in January, says Zoopla

“As things stand, mortgage rates are likely to hover between 4% and 5% in 2025, influenced by both global financial markets and domestic monetary policy. Over the past year, buyers have been getting used to this new normal, understanding that rates are unlikely to return to the historical lows of 1%.

“But the fundamental issue in the housing market remains the lack of supply. This long-term trend, coupled with a gradual improvement in affordability, should support further modest house price growth this year.”

Halifax’s latest HPI also indicated that Northern Ireland continued to have the strongest annual price growth in the UK at +5.9%, although this has eased compared to the +7.3% figure from December.

Scotland saw the lowest annual house price rise, with homes worth an average of £210,690, which is +2.4% more than the year before.

The average cost of a dwelling in the North East of England was £178,698, with the region’s +5.2% annual property price growth being the strongest in the nation. This is the first time since September 2023 that the North West has not topped the table of English regions for annual growth.

London retained the highest average house price in the UK, at £548,288, up +2.8% compared to last year.

In Wales, homes costed an average of £277,397, up +3.6% from last year.